LONDON, Dec 21 (Reuters) - While banks appear to be brushing
off record fines for rigging interbank interest rates, investors
are starting to worry about a rising tide of civil lawsuits from
disgruntled customers.

UBS shares touched 18 month highs after U.S.,
Swiss and British regulators on Wednesday fined the bank a near
record $1.5 billion for fiddling interest rates, the second
regulatory fine for manipulating the London interbank offered
rate (Libor) and its euro equivalent Euribor.

But the "big unknown" cost of repairing the damage caused by
the fixing of rates used as a benchmark for pricing trillions of
dollars worth of financial contracts is civil litigation, said
Paras Anand, European equities head at Fidelity Worldwide
Investment.

"That is one thing at the back of our minds that we have to
be cognisant of," Anand said. Fidelity Worldwide holds around
1.2 percent of UBS stock.

An early indication of the possible cost to the banking
industry came hours after UBS was fined when the U.S. federal
watchdog estimated mortgage lenders Fannie Mae and
Freddie Mac, which had to be bailed out during the
2007/08 financial crisis, could have lost more than $3 billion
as a result of Libor manipulation.

The watchdog urged the regulator to consider whether the
losses warranted a lawsuit against the banks that set Libor.

Since June, when the first fine for manipulation was levied
on Britain's Barclays, there have been a series of U.S.
Libor-related claims.

Claims have come from large investors, local governments
like the city of Baltimore, home owners claiming rate rigging
made their mortgages more expensive, and small U.S. banks that
have filed lawsuits accusing their big cousins of collusion.

In August, New York lawyer Brian Murray filed a lawsuit on
behalf of investors in Alaska - as well as investors in Wyoming,
North Dakota and about 20 other states - accusing banks of
rigging Libor.

In Britain, the Financial Services Authority (FSA) has said
Libor fiddling could have caused "serious harm" to other market
participants. Lawyers, who are starting to circulate guides to
Libor litigation, say potential claims are trickling in.

"I think there are going to be a large number of claims -
and, more importantly, a small number of those will be
incredibly high-value claims," said Ali Akram, senior lawyer at
UK firm Lex Law.

LONG ROAD

The manipulation of Libor casts doubt on every contract that
has used it as a reference point, including commercial borrowers
with loans linked to Libor, parties to interest rate derivatives
such as swaps, investors holding portfolios of floating rate
securities, guarantors of borrowing linked to Libor and savers
being paid a rate of interest referencing Libor.

There are also potential claims by shareholders for any
falls in stock prices as the scandal escalates.

Lawyers believe Libor manipulation has caused extensive
losses to investors and borrowers worldwide. The scale of
payouts could run into tens of billions of dollars, analysts
estimate.

But as Libor rates are calculated by averaging out bank
submissions and stripping out the highest and lowers outliers,
calculating losses and proving individual bank conduct caused a
loss can be complex.

"We're at the beginning of a long road," said Stephen Rosen,
a lawyer for UK firm Collyer Bristow, which has a handful of
clients eyeing Libor-related claims.

To date, just one case has been brought in Britain against
Barclays by Guardian Care Homes, a residential care home
operator. It is suing for up to 37 million pounds ($60 million)
over the alleged mis-selling of interest rate hedging products
that were based on Libor rates.

ECONOMIC SPILLOVER

But the scandal is escalating.

Britain's RBS is also expecting to be fined by next
February, while more than a dozen banks such as Deutsche Bank
, Citigroup, J.P. Morgan and HSBC
remain under the spotlight as authorities in Europe,
Japan and North America probe the Libor scandal.

Barclays, Citi, J.P. Morgan, Deutsche Bank, HSBC, Lloyds,
Rabobank and RBS have all said in previous releases that they
are subject to civil or private lawsuits filed in the United
States over Libor.

Barclays said the first class action lawsuit filed was in
April 2011, and the complaints are similar and seek an
unspecified amount of damages.

Regulators and politicians are mindful of the impact of
lawsuits on economic recovery and stability, some experts say,
coming on top of the fines. While UBS was fined three times more
than Barclays, fears of spiralling settlements could be overdone
as authorities seek to balance the fallout.

"There will be a round of going through pain before
politicians get scared and step in ... At some time politicians
and regulators will wake up and see that it will hit the
economy," said Chirantan Barua, a senior banks analyst at
Bernstein Research.

Baruna estimated about 15-20 banks could be implicated in
the Libor manipulation once global investigations are completed,
which could give claimants plenty of fodder for lawsuits.